Good Energy, one of the UK's leading providers of renewable energy, has been accused of deliberately misleading customers and using a complex accounting mechanism to overstate its green credentials. The accusations come from its main rival, Ecotricity.

Juliet Davenport, chief executive of Good Energy, has vigorously denied any suggestion of wrongdoing by the company and has accused its rival of making "unsubstantiated" claims about its green tariff policies and engaging in a " cynical move to discredit" the firm.

Good Energy, which provides power to a number of high-profile green organisations, including Innocent Drinks and Friends of the Earth, specialises in supplying 100 per cent renewable energy.

In addition to demonstrating that the energy it sells is from renewable sources, Good Energy also claims it helps drive renewable energy investment in the market as a whole by retiring extra Renewable Obligation Certificates (ROCs). ROCs are tradeable instruments created to help the government meet its targets for renewable energy generation. ROCs are issued to and can be sold by renewable generators, while all electricity suppliers are required to surrender ROCs at a rate equivalent to a certain percentage of the energy they supply, or pay penalties. This system gives renewable energy a market value in addition to its natural price.

Good Energy surrenders ROCs over and above the legally required level, rather than selling them on the ROC market. This practice is designed to increase the price of ROCs and consequently make it more attractive for firms to invest in renewable generation.

However, according to official figures from energy regulator Ofgem, there is a significant discrepancy between the quantity of ROCs the company has on occasions claimed to retire and the number that have actually been handed over.

A dossier prepared by Ecotricity and seen by BusinessGreen.com provides evidence of past marketing material from Good Energy, in which it appears to state that it retires a straightforward five per cent of ROCs above the required annual obligation in any one year.

One Good Energy customer who wrote to the company in October 2008 seeking clarification on its ROC retiral policy received a reply stating: "Good Energy goes above and beyond the percentage required by the government (8.9 per cent in 2008), by retiring an extra five per cent of ROCs (ie, 13.9 per cent in 2008)."

Ecotricity's complaint centres on this five per cent figure. Good Energy defends the figure, while Ecotricity has argued it is an exaggerated claim that distorts competition between the two firms.

Figures from Ofgem show that for the year 2007-08, Good Energy supplied 114,199MWh of electricity, but is yet to retire any ROCs in addition to those submitted to meet its legal obligations – although a spokeswoman for Ofgem said the company has until 31 August 2009 to retire additional ROCs for that period.

Ofgem figures also show that in the 2006-07 period, Good Energy retired 2,124 ROCs beyond its obligations – equal to just over two per cent of the 10,4171MWh of electricity the company supplied.

Figures for 2005-06 also demonstrate that the company retired additional ROCs equal to just over three per cent of its supplied electricity.

The Good Energy customer told BusinessGreen.com that in November 2008 he wrote a second letter to Good Energy requesting further clarification on the number of ROCs it has retired and has not yet received a response. He added that he handed the initial letter from Good Energy to Ecotricity after becoming "disenchanted" with the company's failure to answer his questions.

The letter and other materials have angered Ecotricity, which said its competitiveness has been undermined as a result of a number of third-party endorsements – most notably from the National Consumer Council – that cite Good Energy's five per cent ROC retiral policy.

Good Energy chief executive Juliet Davenport said there is no discrepancy between her company's claims and the number of ROCs it retires, and that the apparent shortfall can be explained through the company's accounting policies. She said that accounts detailing the firm's ROC policy have been independently audited and that the company has consistently retired ROCs in a manner that is "financially equivalent" to retiring ROCs corresponding to five per cent of the energy it supplies.

When an ROC is submitted by obligation, a rebate is received, funded by the penalties paid by suppliers that fail to meet their obligations. However, ROCs retired voluntarily do not qualify for any money back.

Davenport said this situation is "unfair" and, as a result, the company instead retires "ROC equivalents". She said her firm retires ROCs at a level that is " financially equivalent" to retiring the pledged five per cent were it to receive money at the same rate as for the ROCs it is required to submit.

The company's annual reports refer to this retiral of "ROC equivalents" and it also explains on its website that it retires "ROCs equivalent to five per cent".

"It has always been Good Energy's stated policy to provide some additionality to our renewable offering by retiring ROCs above and beyond our legal obligation," Davenport said. "This we have done, as the published Ofgem figures show. We have no legal obligation to do this and, we believe, we're the only electricity supplier to go above and beyond our legal duty."

However, a spokeswoman for Ofgem said that the concept of "ROC equivalents" does not appear anywhere in the Renewables Obligation legislation.

Good Energy was lauded in a National Consumer Council (NCC) report, in part as a result of its ROC retiral policy. The report stated that "Good Energy is making a serious attempt to provide additional environmental benefits. By retiring out of the system Renewables Obligation Certificates equivalent to five per cent of the electricity it supplies, it ensures that this electricity is clearly additional to its legal requirements… Good Energy is the only supplier to receive three unqualified ticks for its green supply tariff out of those listed in table three. These additional environmental benefits are tangible and account for the premium Good Energy charges."

Dale Vince, chief executive of Ecotricity, has accused Good Energy of deliberately misleading customers and called on the NCC to amend or retract its report. "Good Energy has said for years that it retires more ROCs than it needs to, but the Ofgem figures show clearly that they have not retired as many as they are saying," he said.

He also said that calculations undertaken by Ecotricity based on Ofgem's figures suggested that Good Energy would have posted consistent losses over the past five years had it retired ROCs at a straight numerical five per cent, rather than using "ROC equivalents" to calculate the amount surrendered.

A spokesperson for Consumer Focus, formerly the NCC, said: "Good Energy… buys and retires Renewable Obligation Certificates (ROCs) over and above the amount required. By taking these additional certificates out of the system, the company ensures that this electricity is additional and can't be double-counted. However, it has recently been brought to our attention that there may be a disparity between Good Energy claims and Ofgem's official figures for the percentage of ROCs retired. Consumer Focus is working closely with Ofgem and Good Energy to achieve clarity on this issue."

Davenport admitted the "ROC equivalents" policy is confusing, but rejected any suggestion the company had deliberately misled customers. She added that the company would be "penalising" its customers with higher bills if it failed to adjust for the lack of rebate on voluntarily surrendered ROCs.

She admitted that the company had received three complaints through formal channels about the policy, and that it had responded to each and explained its position.

Davenport added that Good Energy is working on a simpler tariff due later this year and called for the urgent roll out of new guidelines from Ofgem designed to make green tariffs more transparent.

"A step towards [greater transparency] is coming with the new green supply guidelines due in later this year from Ofgem," she said. "These guidelines will highlight the fuel mix in your supply – exposing those suppliers that make claims to renewable supply, despite buying a majority of their electricity from 'brown' sources."

She accused Ecotricity, which supplies a proportion of its energy from non-renewable sources, of engaging in a "cynical move to discredit Good Energy" and opposing Ofgem's stricter controls over 'green' tariffs.